I am having a LIC endowment plan known as jeevan saral-165 which has sum assured value of 750000 for a period of 35 yrs. Now I planning to Surrender it as I have completed 10 yrs and I am getting Rs. 610000 as surrender value on the premium paid by me for Rs. 385000. Can you please tell what will be the tax implication on it and is it a good decision to surrender the same?
Surrender of LIC endowment plan known as jeevan saral-165
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TaxWiser
KF Mentor
Hey!
It sounds like you've put a lot of thought into this. Here's what you need to know about the tax implications and whether it's a good decision to surrender your LIC Jeevan Saral-165 plan:
Tax Implications:
- The surrender value you receive will be added to your income and taxed as per your applicable income tax slab rate.
- However, if your policy's sum assured is more than five times the annual premium (which is applicable for policies issued between 1/4/2003 and 31/03/2012), the surrender value will be tax-free.
Everyone including me who follows LLA (Labour Law Advisor) on youtube, considers ULIPs as the worst Investment & Insurance product. My suggestion is buy a term life insurance and invest this amount as per your risk appetite.
Hope this helps!
TaxWiser thanks for the information. This Lic policy is taken in jan 2013 and i have already taken Term Plan.Hey!
It sounds like you've put a lot of thought into this. Here's what you need to know about the tax implications and whether it's a good decision to surrender your LIC Jeevan Saral-165 plan:
Tax Implications:
Ultimately, it depends on your current financial situation and future goals.
- The surrender value you receive will be added to your income and taxed as per your applicable income tax slab rate.
- However, if your policy's sum assured is more than five times the annual premium (which is applicable for policies issued between 1/4/2003 and 31/03/2012), the surrender value will be tax-free.
Everyone including me who follows LLA (Labour Law Advisor) on youtube, considers ULIPs as the worst Investment & Insurance product. My suggestion is buy a term life insurance and invest this amount as per your risk appetite.
Hope this helps!
vineetrathor57
KF Rookie
HiHey!
It sounds like you've put a lot of thought into this. Here's what you need to know about the tax implications and whether it's a good decision to surrender your LIC Jeevan Saral-165 plan:
Tax Implications:
Ultimately, it depends on your current financial situation and future goals.
- The surrender value you receive will be added to your income and taxed as per your applicable income tax slab rate.
- However, if your policy's sum assured is more than five times the annual premium (which is applicable for policies issued between 1/4/2003 and 31/03/2012), the surrender value will be tax-free.
Everyone including me who follows LLA (Labour Law Advisor) on youtube, considers ULIPs as the worst Investment & Insurance product. My suggestion is buy a term life insurance and invest this amount as per your risk appetite.
Hope this helps!
Can you help me understand how come above person is getting more in surrender value then the premium paid,
Do they give bonus also after sometime when we surrender ?
I am also thinking to surrender my jeevan anand policy but they are giving only 30% of premium paid whereas i remember irdai revising surrender value rules to give atleast 75% of premium paid
Please help
TaxWiser
KF Mentor
Sure, I can clarify this for you
Surrender Value, Bonuses and Taxation
1. Surrender Value Calculation:
- Guaranteed Surrender Value: This is usually a percentage of the total premiums paid, excluding the first year's premium and any extra premiums. For many policies, this is around 30%.
- Special Surrender Value: This can be higher and is calculated based on the policy's maturity sum assured and the number of premiums paid. It may also include bonuses accrued over the policy term.
- LIC policies like Jeevan Saral and Jeevan Anand often declare bonuses, which are added to the policy's value over time. When you surrender the policy, these bonuses can increase the surrender value, making it higher than just the premiums paid.
- Regarding taxation, the surrender value will be added to your income and taxed according to your applicable income tax slab rate. However, if the sum assured of your policy is more than five times the annual premium, the surrender value may be tax-free, provided the policy was issued between April 1, 2003, and March 31, 2012.
IRDAI Revised Rules
You are correct that the IRDAI revised the rules to ensure a higher surrender value for policyholders.
- Policies with a term of less than 10 years: The guaranteed surrender value is at least 30% of the total premiums paid after three years.
- Policies with a term of 10 years or more: The guaranteed surrender value is at least 50% of the total premiums paid after three years.
- Revised Rules: For policies surrendered after five years, the guaranteed surrender value should be at least 50% to 75% of the total premiums paid, depending on the policy terms.
The difference in surrender values can be due to:
- Policy Terms: Different policies have different terms and conditions.
- Bonuses: Accumulated bonuses can significantly increase the surrender value.
- Policy Duration: The longer you hold the policy, the higher the surrender value due to accumulated bonuses and revised rules.
If your Jeevan Anand policy is offering only 30% of the premiums paid, it might be due to:
- The policy term and the number of years you have paid premiums.
- The specific terms of your policy regarding surrender value.
Hope this Helps
(Source: Labour Law Advisor YT, Gemini AI)
vineetrathor57
KF Rookie
I have jeevan anand policy and have paid 3 annual premium till now amounting to 165000Sure, I can clarify this for you
Surrender Value, Bonuses and Taxation
1. Surrender Value Calculation:
2. Bonuses:
- Guaranteed Surrender Value: This is usually a percentage of the total premiums paid, excluding the first year's premium and any extra premiums. For many policies, this is around 30%.
- Special Surrender Value: This can be higher and is calculated based on the policy's maturity sum assured and the number of premiums paid. It may also include bonuses accrued over the policy term.
3. Taxation:
- LIC policies like Jeevan Saral and Jeevan Anand often declare bonuses, which are added to the policy's value over time. When you surrender the policy, these bonuses can increase the surrender value, making it higher than just the premiums paid.
- Regarding taxation, the surrender value will be added to your income and taxed according to your applicable income tax slab rate. However, if the sum assured of your policy is more than five times the annual premium, the surrender value may be tax-free, provided the policy was issued between April 1, 2003, and March 31, 2012.
IRDAI Revised Rules
You are correct that the IRDAI revised the rules to ensure a higher surrender value for policyholders.
Why the Difference?
- Policies with a term of less than 10 years: The guaranteed surrender value is at least 30% of the total premiums paid after three years.
- Policies with a term of 10 years or more: The guaranteed surrender value is at least 50% of the total premiums paid after three years.
- Revised Rules: For policies surrendered after five years, the guaranteed surrender value should be at least 50% to 75% of the total premiums paid, depending on the policy terms.
The difference in surrender values can be due to:
Your Jeevan Anand Policy
- Policy Terms: Different policies have different terms and conditions.
- Bonuses: Accumulated bonuses can significantly increase the surrender value.
- Policy Duration: The longer you hold the policy, the higher the surrender value due to accumulated bonuses and revised rules.
If your Jeevan Anand policy is offering only 30% of the premiums paid, it might be due to:
It’s important to consider the financial implications of surrendering your policy. While you may incur some losses, it might be beneficial to invest in more suitable financial products like mutual funds for better returns and a pure term insurance plan for adequate life cover like Jagruk Janta of LLA. It might be helpful to contact LIC directly or consult with a financial advisor to get a detailed explanation and ensure you are getting the correct surrender value based on the latest IRDAI rules.
- The policy term and the number of years you have paid premiums.
- The specific terms of your policy regarding surrender value.
Hope this Helps
(Source: Labour Law Advisor YT, Gemini AI)
And i asked customer care ,they told surrender value is 63266,
I think that after 1 more premium payment , the surrender value should become 50%
So should I wait and then close after 4yrs or should i wait for few more years ?
TaxWiser
KF Mentor
It really depends on your risk appetite and financial knowledge. If you have enough experience and understanding of investments to manage the potential loss from closing this policy, then it might be worth considering. However, if you’re unsure, it might be better to wait until you’ve recovered your initial investment.
